NHL Math: When 51.6% Is Actually Less Than 50%

Jonathan Willis
August 29 2012 11:35AM

Details about the NHL’s new CBA proposal have come out – TSN has the details here - and at first glance it looks like a significant step in the right direction. There’s no roll-back, and the players will earn more than 50 percent of hockey-related revenue in the first two years of the deal, a little less in year three, and then 50 percent for the next three seasons. Given that most feel the deal will eventually be a 50/50 split between owners and players, that sounds fair, right?

It’s a step in the right direction, but the proposal is nowhere near as good as it looks at first blush.

Rollback

First, the lack of a rollback. The fact that the owners aren’t demanding a rollback doesn’t mean that they aren’t clawing money back from the players – as virtually everyone has pointed out, they’ll be doing it through escrow.

It is better than a rollback, because by the fourth year of the new deal the possibility is that the salary cap will be more or less where it is now. So, for players with more than three years on their current contracts, escrow will only hurt them bad for the first three years; a rollback would hurt them until the contract ran out. Still, until such time as the salary cap returns to where it is today, players will be giving the same money back that they would be under a rollback system.

The good news here: the league doesn’t plan to make the rollback a sticking point. The NHLPA has been dead-set against it, so a willingness to consider other mechanisms is good news.

50 Percent

We have two different pieces of information from Darren Dreger above. In Year One, players will collect 51.6% of the newly defined hockey-related revenue, and they’ll also have a salary cap of $58 million. What we’re interested in is what percentage they get of hockey-related revenue as currently defined.

Right now, the salary cap is set at $70.2 million. The player’s percentage – 57 percent – is calculated based on the salary midpoint, $8 million less than the cap. So, 57 percent of current hockey-related revenue is the same as 30 teams spending $62.2 million, the mid-point between the salary cap and salary floor.

What we don’t know is whether the NHL is calculating the midpoint as they do currently ($8 million below the cap) or as they suggested it be calculated in their original proposal ($4 million below the cap). Let’s look at both cases.

If the cap/midpoint are calculated under the current rules:

  • Then a salary cap of $58 million means a salary mid-point of $50 million.
  • That $50 million is to X percentage as $62.2 million is to 57 percent
  • Therefore, we divide $50 million by $62.2 million, and multiply the result by 57 percent…
  • And we get the player’s share in Year One as 45.8 percent of hockey-related revenue
  • As per Eric T.'s comment below, the calculation above doesn't include the 5% escalator
  • When we recalculate for the 5% escalator (by reducing 62.2/1.05), we end up at 48.1 percent HRR

If the cap/midpoint are calculated under the rules proposed by the NHL in their initial offer:

  • Then a salary cap of $58 million means a salary mid-point of $54 million.
  • That $54 million is to X percentage as $62.2 million is to 57 percent
  • Therefore, we divide $54 million by $62.2 million, and multiply the result by 57 percent…
  • And we get the player’s share in Year One as 49.5 percent of hockey-related revenue
  • As per Eric T.'s comment below, the calculation above doesn't include the 5% escalator
  • When we recalculate for the 5% escalator, we end up at 52.0 percent HRR

Either way, it’s less than 50 percent. I suspect we’re looking at the former situation, which would be a small give on the league’s part. If we’re looking at the latter situation, than the NHL’s really moving forward from their initial offer.

Edit to add: I still suspect that we're looking at the former situation, but re-running the numbers to allow for the 5% escalator gives us an NHL offer that does represent a significant step forward from their original proposal. We're still looking at a steep decline for players - from 57 percent to 48 percent in year one - but that's a lot better than the 43 percent the league started out offering, and might be enough of a move to spark negotiations.

Regardless, one of the things that redefining hockey-related revenue does is give the league the ability to say “let’s do X percentage” when really they mean a lower number. Given that perception is that the NFL and NBA settled around the 50 percent mark, that’s a perception that plays in the league’s favour as they push for those numbers.

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Jonathan Willis is a freelance writer. He currently works for Oilers Nation, Sportsnet and Bleacher Report. He's co-written three books and worked for myriad websites, including the Edmonton Journal, Grantland, ESPN, The Score, and Hockey Prospectus. He was previously the founder and managing editor of Copper & Blue.